World stocks down as Fed action deemed too little

World stocks down as Fed action deemed too little

An investor looks at the stock price monitor at a private securities company in Shanghai, China. (AP Photo)

An investor looks at the stock price monitor...

Photo by
Associated Press
/Times Free Press.

PAMELA SAMPSON

BANGKOK (AP) - World stock markets and commodities were mostly lower Thursday as investors registered dismay at the path chosen by the Federal Reserve to try to invigorate the stalled U.S. recovery and a survey suggested China's manufacturing remains weak.

At the end of a two-day policy meeting Wednesday, the Fed said it was extending a program called Operation Twist, under which the Fed swaps short-term bonds for longer-term ones to help keep long-term interest rates low.

But analysts said the program's extension might not provide much benefit. Businesses and consumers who aren't borrowing now aren't that likely to change their minds just because rates dropped a little more.

Appetite for financial assets such as stocks was also dented by the preliminary results of a monthly HSBC survey which showed that manufacturing in China, the world's No. 2 economy, has continued to contract.

Stan Shamu of IG Markets in Melbourne said in a market commentary that investors were "disappointed" that the Fed had not chosen to embark on a third major round of bond purchases, known as quantitative easing.

Such purchases would lower rates even further. The Fed has completed two such programs, buying more than $2 trillion in Treasury bonds and mortgage-backed securities, to help prop up the economy.

"Sentiment also dampened after the Fed cut estimates for economic growth on the back of a slowing jobs and tough credit markets," Shamu said.

Among individual stocks, Evergrande Real Estate Group - a Chinese property developing giant - plummeted 12 percent in Hong Kong after Citron Research published a report questioning the solvency of Guangzhou-based Evergrande.

The report, which elicited a denial but few details from Evergrande, jolted traders.

"It's one of the biggest developers, so it's a little shocking. That caused the entire line of mainland developers to fall sharply," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.

U.S. stocks fell slightly on Wednesday after the Federal Reserve cut its estimate for economic growth for the year.

The Dow Jones industrial average fell 0.1 percent to close at 12,824.39. The Standard & Poor's 500 index fell 0.2 percent to 1,355.69. The Nasdaq composite rose marginally to 2,930.45.

In currencies, the euro was unchanged from $1.2672 late Wednesday in New York. The dollar rose to 79.55 yen from 79.47 yen.